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Federal National Mortgage Association
Federal Home Loan Mortgage Corp
For Nancy J. Becker, recorder of deeds in Montgomery County, Pa., outside Philadelphia, property records are practically sacred. So much so that her office keeps digital copies of land records dating to 1784 on four separate databases, including one 1,700 miles away. If the county seat were leveled tomorrow, she says, “I could still record documents on my laptop on the street corner with a card table.” Becker may sound tech-savvy, but to some of her constituents’ dismay, she can’t always call up a property with a keystroke and see who holds its note. That’s because more than 200,000 of her records list the lien holder as MERS, the private company that acts as a proxy for banks that bundle and sell off mortgage securities. That can make it all but impossible for a recorder to determine who really holds the paper.
Homeowners have registered property at municipal land offices for more than 200 years. It used to be that every time a loan changed hands, the bank recorded the new deed holder with the local register for a small fee. In theory, this meant a property owner could walk into the land office and look up who held the note on his house. In reality, the registration process was often slow going, and files piled up partly because many offices stuck with pen and paper long after the rest of the world went digital.
Once the market for mortgage securities expanded, this system couldn’t keep up with Wall Street’s split-second transactions. So in 1995, Fannie Mae (FNMA), Freddie Mac (FMCC), and a group of lenders created MERS, a registry to track the loans banks were buying and selling. This allowed member banks to list MERS as the lien holder, sidestepping local recorders—and their fees—each time the debt on a property was transferred. Today the MERS registry includes 60 percent of U.S. mortgages. That, combined with the housing crash, has left municipal recorders with dwindling fees, and they’re facing budget crunches as a result. Becker says MERS has made a mess of the files she was elected to safeguard for Montgomery’s citizens, and that the corporation has deprived her community of much-needed revenue. As her county stares down a $42 million shortfall, Becker is fighting back. Montgomery County intends to sue MERS for $15.7 million in unpaid fees dating to 2004, when Becker was first elected to her office. She says state law requires all transactions to be filed with the local recorder. MERS maintains that it abides by the law.
Recorders generally don’t make headlines, but Becker’s public protests did. She says she was thrilled when she received a flood of “You go, girl!” e-mails cheering her on. The mini-movement’s main champions are John L. O’Brien, keeper of land records in Salem, Mass., and Jeff L. Thigpen, the register of deeds in Greensboro, N.C. In April they asked Iowa Attorney General Tom Miller, who heads a group that’s negotiating with banks over wrongful foreclosures, to press for reform. When O’Brien’s and Thigpen’s letter to Miller made national news, the men began teaching other recorders how to get what they say they’re due.
Counties in Kentucky, Ohio, Oklahoma, and Texas have filed suit for back fees. In one of the largest cases, Dallas County sued MERS in October, saying the company owes it as much as $100 million. Bobby Brochin, a lawyer for MERS, says the company isn’t involved in the types of transactions that state laws require to be recorded locally. He says the lawsuits have “absolutely no merit.”
Whatever the courts decide, recorders acknowledge that the quaint era of paper records they clung to for so long is over. They may not like MERS’s tactics, but they have adopted some of its ease and convenience. When Becker started out, her office filed everything on paper and had a nine-month backlog of deeds waiting to be recorded. Today everything is digital, and it takes a day.
The bottom line: Land offices around the country are trying to recoup millions of dollars in fees they say they were shorted during the housing boom.